Merrill Lynch to pay $80 million settlement in Enron case; four ex-executives charged
Monday, March 17th 2003, 12:00 am
By: News On 6
WASHINGTON (AP) _ The Securities and Exchange Commission on Monday charged four former executives of Merrill Lynch with helping Enron inflate profits and mislead investors with financing deals. Merrill agreed to pay $80 million to resolve the 1999 case.
The SEC and Merrill, the nation's biggest brokerage firm, reached a tentative settlement agreement last month. The firm neither admits nor denies wrongdoing in the settlement, which it says ends the SEC's investigation into its dealings with Enron.
``This action is a message to all who would help a ... company commit fraud: We will bring the full weight of our enforcement arsenal against you,'' SEC Chairman William H. Donaldson said at a news conference. ``Our commitment to protect investors demands nothing less.''
In a civil lawsuit filed in federal court in Houston, the SEC alleged that the former Merrill executives ``aided and abetted Enron Corp.'s earnings manipulation'' by working with Enron executives to set up the transactions. The four men are disputing the SEC's allegations.
The SEC named former Merrill vice chairman Thomas W. Davis, 49; Schuyler Tilney, 47, an investment-banking managing director who directly oversaw corporate finance matters related to Enron; Robert Furst, 41, a managing director in the investment banking division; and Daniel Bayly, 55, the global head of the division who later became the firm's chairman of investment banking.
The former executives have previously denied any wrongdoing. Davis and Tilney were fired by the firm in September. Furst resigned in 2001 and Bayly retired last fall. Davis, Tilney and Furst asserted their Fifth Amendment privilege and refused to testify before a Senate panel in July or testify in the SEC's investigation.
Davis intends to vigorously defend the charge against him, said his attorney, Thomas Fitzpatrick.
He said Davis gave final approval to one of the deals, in which Merrill bought three energy-producing Nigerian barges from Enron, only after it had been thoroughly checked out by Merrill's lawyers and firm executives. ``He did not aid Enron in fraudulently accounting for the transaction and he did not even know how Enron booked the transaction,'' Fitzpatrick said.
Tilney's lawyer, Robert Trout, said his client ``did not engage in any wrongdoing.'' Said Furst attorney Daniel Horwitz: ``Robert Furst is a person of integrity and did not engage in wrongful conduct.''
Bayly's attorneys didn't immediately return telephone calls seeking comment.
Merrill agreed to refrain from future violations of federal securities laws and said in a news release that it agreed to the settlement ``to resolve the inquiry and put the matter behind it.''
News of the SEC action came the same day congressional investigators released a report concluding that the SEC faces legal obstacles in pursuing cases alleging that Wall Street firms aided the now-bankrupt Enron and other companies in accounting fraud.
The Justice Department, in a criminal complaint filed last fall against Enron's former chief financial officer, Andrew Fastow, called the Nigerian barge deal a ``sham transaction'' that helped Enron ``manufacture earnings.''
Several recent investigations in Congress have shone a spotlight on the role in Enron's complex, deceptive financial schemes of its big investment bankers _ Merrill, Citigroup and J.P. Morgan Chase _ which have been sued by Enron shareholders seeking billions of dollars in damages.
By reaching a settlement with the SEC, Merrill avoids the release of findings by the agency that could be used against it in the court cases.